Exam 7: Investment Companies and Exchange Traded Funds

The mutual fund enters into a contract with a distributor or broker-dealer to manage the fund's portfolios. The distributor can be an affiliate of a brokerage firm, an insurance company, a bank, an investment management firm, or an unrelated company.

Name three alternatives to mutual funds.

The major alternatives to mutual funds are ________.

In order to meet investor needs, mutual funds offered in the market differ by a variety of measures. Which of the below is not ONE of these?

Due to the success of mutual funds, investment companies have had no need to develop alternatives to mutual funds.

There are important aspects of open-end funds, commonly referred to simply as mutual funds. Describe three of these aspects.

The role of the ________ is to represent the fund shareholders by jointly overseeing the activities of a company.

Mutual funds have become very popular with individual investors since the 1980s. However, they are often criticized for two reasons. Which of the below is ONE of these reasons.

The open-end aspect of mutual funds is ________; that is, investors invest funds directly in or withdraw funds from the mutual fund. The open-end aspect of ETFs is ________ in that the investors buy the ETF in a closed-end manner like closed-end funds and then the authorized participant ________ between the ETF and the underlying portfolio, providing the indirect open-end aspect of the ETF.

Fund companies and distribution companies have developed new outlets for selling mutual funds and expanded their traditional sales channels. The changes that occurred are evident in the rising share of sales through ________.

Mutual funds may be included in several different investment vehicles.

Explain what is meant by an index fund. In your answer contrast it with an active fund.

What are variable annuities?

Overall, the NAV of a mutual fund will increase or decrease due to an increase or decrease in the prices of the securities in the portfolio.

Financial intermediaries provide some or all of the following six economic functions: (1) risk reduction via diversification, (2) lower costs of contracting and processing information, (3) professional portfolio management, (4) liquidity, (5) variety, and (6) a payments mechanism. Describe three of these functions, as provided by mutual funds.

A decade ago, many observers speculated that load funds would become obsolete. But, the actual trend has been quite different. Which of the below is offered as a reason for load funds maintaining a costly fee?

The total shareholder costs of owning a mutual fund have decreased in recent years due to a reduction in distribution costs, and due to economies of scale in other fund expenses.

________ are managed accounts, typically mutual funds or ETFs "wrapped" in a service package, and provide investors with advice and assistance for an asset-based fee rather than the traditional front-end load.

Some fund families use external managers to manage all or a portion of their internal funds. These external advisers are called subadvisors. Describe two of the reasons why a family of funds would use subadvisors.

Many mutual fund families often offer their funds with three share classes: A, B, and C. Which of the below correctly describes these three classes?